Friday, November 12, 2010

Additional Notes on Bankruptcy Affecting Your Credit Score

As a follow up to my previous piece, I wanted to provide more information on a bankruptcy's effect on your credit score.  Your credit score is only affected by Chapter 7 and Chapter 13 personal bankruptcies.  If your company is involved in a Chapter 7 or Chapter 11 corporate bankruptcy, it will not affect your credit at all--it will only affect that of your corporation.

This is the reason why people who are self-employed often incorporate.  It is best to keep your personal finances separate from your company finances.  Often, people pay themselves a salary under their own corporation so that if something happens to the company, that will be hurt but not personal credit.

Ultimately, bankruptcy is something to avoid on a personal level, but on a corporate level, it happens everyday.